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Dow Proves That Japan Can't Hold the Market Down

Concerns over the Asian country's continued slide may have dampened the index's morning, but the Dow has moved on since then.

Though the market began the day in a slump over global economic concerns, the Dow Jones Industrial Average(DJINDICES:^DJI) is back in positive territory just after 11 a.m. EDT. Some positive economic news here at home is driving the modest gains, while new pushes in Congress are bolstering some of the Dow's components.

Pacific timeWith continued unease over the effect of central banks' efforts, investors may have translated signals from Japan as truth for the U.S. markets. The Japanese Nikkei lost another 6%-plus yesterday in trading, which equates to a 1,000-point loss for the Dow. This happened despite Herculean efforts from the Bank of Japan to stabilize the Japanese economy in the past months. Demonstrating the ineffectiveness of some monetary policy, U.S. investors sent the market tumbling this morning in fear of the same developments occurring here. The Federal Open Markets Committee meets next Tuesday, and will give investors the news they've been waiting for on the Fed's intentions for its current stimulus plan.

Back in the U.S., increases in retail sales and a decline in new jobless claims boosted the market back above breakeven. May retail sales rose 0.6%, beating analyst estimates of 0.4%, due to strong gains in the automotive and home-building supplies market. Since retail sales account for 30% of consumer spending, this is a great signal to investors that households are back on solid footing with their financials and the cuts from Washington along with higher taxes aren't going to prolong the softening market conditions we've seen in the past few weeks. Since cars are a high-ticket purchase, this also signals a willingness of consumers to borrow, showing the ability to manage more personal debt.

Jobless claims fell by 12,000 last week, a positive change from the previous week's sharp increase. The decline in new claims shows that companies have cut back on employees enough, and has demonstrated a smaller impact of the sequestration than initially anticipated. Both pieces of economic news, having beat expectations, give investors increased confidence that the second quarter's prospects are still improving from the softening seen in the past few weeks.

You can bank on itDespite the weakness in Japan that has previously caused headaches for some of the nation's biggest banks, JPMorgan(NYSE:JPM) and Bank of America(NYSE:BAC) are both firmly in positive territory this morning. Likely as a result of a new bill in the House of Representatives, the banks are enjoying some increased confidence that portions of the government are trying to make sure regulators don't cut off opportunities for the banks to profit. A bill was passed in the House over the past few days that was aimed at excluding trades of derivatives and swaps completed in foreign countries from U.S. regulatory oversight. Since five banks in the U.S. -- JPM, B of A, Citigroup(NYSE:C), Morgan Stanley(NYSE:MS), and Goldman Sachs -- control over 90% of the market in these financial instruments, this bill is a big win. Analysts estimate that approximately 40% to 45% of trades are completed overseas, so the new bill's restriction on oversight would allow the banks greater freedom and keep their businesses competitive.

The bill may not move past the House, but the effort has given the banks and their investors some added confidence that the recent slate of new regulations is being carefully watched and that they have support from friends in high places.

Fool contributor Jessica Alling has no position in any stocks mentioned -- you can contact her here. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.